(Bloomberg) — Bobby Jain signaled that efforts to raise cash for his new hedge fund faced competition from private credit firms that attracted investors looking for alternative strategies.
Most Read from Bloomberg
Investors who used to buy bonds to hedge volatility in the stock market are now looking for other asset classes for “uncorrelated” investments, Jain said at the UBS Singapore Family Wealth Forum on Thursday.
“Private credit has taken up a lot of that,” Jain said. “The theme we’re going to capture in our fund is the same disintermediation theme.”
The founder of Jain Global LLC is visiting Asia ahead of the July start of his hedge fund, which aims to raise at least $5 billion. While that’s set to be one of the largest launches in years, it’s lower than an earlier goal of as much as $10 billion.
The private credit market has boomed in recent years, as lending moves away from the traditional banking sector. Private credit will nearly double in size compared with 2022, reaching $2.8 trillion by the end of 2028, according to researcher Preqin.
QuickTake: Why Is Private Credit Booming? How Long Can It Last?
Asked about fundraising conditions this year, Jain said it’s been “a big headwind” for venture capital and private equity funds. “For what we’re doing I would say it’s not a headwind, it’s not a tail wind, it’s about a flat wind.”
Even so, Jain described the fundraising environment as “reasonable,” with many investors in the private wealth space underweight in alternatives — a sweeping category of finance that includes hedge funds.
“That’s been quite a good portion of the market for us,” he said.
While Jain’s launch was initially expected to be the biggest ever hedge fund startup, it was forced to curtail earlier ambitions despite slashing fees to make backing his fund even more attractive. That’s partly a reflection of how much harder fund-raising has become for the broader industry.
Only 23% of family offices surveyed by UBS for its 2024 Global Family Office Report plan to increase their allocations to hedge funds, with almost half planning to keep it flat, and 12% predicting a decrease.
New York-based Jain Global is expected to have more than 30 employees in Asia by the time it begins trading, adopting a management model that gives local leaders control over key functions like hiring and risk, Bloomberg News reported earlier. The hires will be split roughly equally between Hong Kong and Singapore.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.